Labor & Employment Law Daily Workers’ comp exception for independent contractors didn’t extend to contractor’s employees
Tuesday, March 12, 2019

Workers’ comp exception for independent contractors didn’t extend to contractor’s employees

By Marjorie Johnson, J.D.

Because the exception did not extend to two planters injured while employed by a sugarcane farm’s independent contractor, the farm’s insurers were not immune from a $2.5 million award in their personal injury lawsuit.

The insurers of a Louisiana sugarcane farm were not entitled to statutory immunity from a negligence lawsuit brought by two injured cane planters who were employed by the farm’s independent contractor and who suffered severe injuries when a farm employee drove into them and crushed their legs. Because the Fifth Circuit ruled that the workers’ compensation statute’s exception for independent contractors who perform manual labor did not apply to employees of the independent contractor, and that the workers were also not the sugarcane farm’s “presumed” or “borrowed” employees, they were entitled to their $2.5 million recovery and the judgment was affirmed (Jorge-Chavelas v. Louisiana Farm Bureau Casualty Insurance Co., March 7, 2019, Costa, G.).

Hired by sugarcane planter. The two planters were Mexican citizens that were hired to work in the United States by Lowry Farms, a company that plants sugarcane for other farmers. Lowry recruited them and obtained the necessary visas. The company also agreed to pay them an hourly rate and to provide them housing, transportation to and from the worksite, and workers’ compensation insurance. They were also told that they were required to work all hours as directed by management personnel.

While working on a Louisiana sugarcane farm operated by Harang Sugars, the two men suffered severe injuries when a Harang employee drove into the sugarcane cart they were sitting on and crushed their legs. They brought this personal injury action against Harang’s insurers, which argued that it was not liable either because (1) the men were Harang’s employees, whose injuries were excluded from its general liability policy; or (2) Louisiana workers’ compensation (WC) laws granted their insured immunity from this suit.

Contractual relationship. Under their contract, Harang paid Lowry on a per-acre-planted basis, as opposed to per hour worked by a planter. The agreement also treated the planters as Lowry’s employees, stating that the payments were “for the work performed by Lowry Farms, Inc. workers.” While Harang requested 21 workers for the season, it had no role in the selection of those individuals. And at the end of each week, Harang filled out a time sheet for the planters, but it was Lowry’s crew leaders’ responsibility to report the planters’ hours to Lowry, who paid the planters.

Harang provided the necessary equipment but typically did not exert direct control over the planters and would contact Lowry’s office manager it there were any problems with the planters’ work. Harang also had no authority to fire a planter and could only voice concern. The record also revealed that Harang’s management did not believe the planters were its employees. On the day of the accident, after calling emergency services, Harang’s owner immediately notified Lowry. When asked why, he replied, “Because that’s their employees.” Additionally, Lowry’s WC insurer covered the planters’ medical expenses.

$2.5 million award. The two men brought this personal injury action against Harang and a bench trial followed. The parties agreed that Harang was at fault and that total damages would be $2.5 million (the limit of the insurance policy). After deciding that the planters were not Harang’s employees and that the WC laws did not otherwise provide it immunity, the district court awarded the men a sum total of almost $2.5 million.

Exception for contractor’s engaged in manual labor. Though independent contractors generally are excluded from Louisiana’s WC regime, the statute provides an exception for those who are engaged primarily in manual labor. Such a contractor has a claim for workers’ compensation against his principal, who in turn is immunized from a negligence suit. The primary issue here was whether that exception extended to the employees of excepted independent contractors. If so, Harang would be immune from suit by Lowry’s employees.

Plain meaning of independent contractor. In an extensive discussion, the Fifth Circuit ultimately concluded that the exception did not extend to an independent contractor’s employees. The court determined that the text of the statute did not support the insurers’ argument. “As the term indicates, an independent contractor is ‘one that contracts’ with the principal.” Under this “widespread understanding” of the term, the two planters were not Harang’s contractors as they never entered into an express or implied agreement with it. Other statutory language confirmed that the law was referring to “independent contractor” in this ordinary sense of the term—one who has a contractual relationship with the principal.

Law didn’t extend to contractor’s employees. For example, it excepted only an independent contractor for whom a substantial part of his work is “spent in manual labor by him in carrying out the terms of the contract.” And the relevant contract is one “for a specified recompense for a specified result either as a unit or as a whole.” But, as was the case here, “employees of an independent contractor are typically not parties to ‘the contract,’ which would be between the principal and the contractor.” The little guidance from the Supreme Court of Louisiana was consistent with this plain meaning of the statute. And while three Louisiana intermediate court decisions held or indicated otherwise, after a thorough statutory analysis, the Fifth Circuit determined that the WC statute’s exception for individual contractors performing manual labor was limited to independent contractors themselves, not their employees.

Not “presumed” or “borrowed” employees. The court also rejected the insurers’ contention that the WC regime still applied since the planters were Harang’s “presumed” employees as they rendered service for another “in any trade, business or occupation.” However, Louisiana courts general view this presumption to be overcome if the worker lacks an express or implied employment agreement with the business. Therefore, since the planters did not have an express or implied agreement with Harang, they were not “presumed” employees.

The insurers also failed to convince the court that the planters were Harang’s “borrowed” employees since their argument failed under either the nine-factor or 10-factor tests utilized by Louisiana courts to decide if a borrowed employment relationship exists. Lowry “at all times” controlled its planters, as it chose which ones went to which farms and required them to “work all hours as directed” by its personnel. There was no agreement recognizing a borrowed employment relationship, the planters never acquiesced to being borrowed employees, Lowry maintained a close relationship with the planters throughout the season, only Lowry could fire the planters, and it was obligated to pay them. Though Harang argued that the planters were doing its work for which it provided the tools, this did not overcome the number and importance of the factors weighing against it.

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